The bubble is created from the nose cone and its own rocket motor which uses HTP and kerosene (An explosion in a dummy Shkval torpedo is said to be the likely cause of the Kursk disaster).
The torpedo moves through the water so fast (200 knots which is actually about
230mph) that it creates the bubble of air around it thus enabling it to move with extremely reduced drag.
The downside of the early Shkval (and likely also applies to the Iranian version the Hoot) is that it's an unguided torpedo, so if the enemy submarine is far enough away to hear the launch, it can move, but if it's up close, it'll be dead before it knows what hit it (I speak from bitter simulator experience, my sonar-man hadn't even finished saying 'Torpedo in the water' before it hit me),
however there are reports that the latest version of the Shkval, the Shkval 2 is guided, possibly through vector thrust and with terminal guidance abilities, making it a much more lethal weapon.
It's certainly something I wouldn't want to encounter in a live fire scenario.
EDIT: Also, another important upgrade of the Shkval 2 over the early version is range, the new model can apparently go some ten thousand meters further than the originals two thousand meters, couple that with the guidance and it's now more like a regular torpedo but with stupidly high speed.